Safe and Sound

BankTennessee

Collierville, TN
4
Star Rating
Founded in 1934, BankTennessee is an FDIC-insured bank based in Collierville, TN. As of December 31, 2017, the bank had equity of $30.4 million on assets of $308.2 million.

U.S. bank customers have $276.3 million on deposit at 8 offices in TN run by 73 full-time employees. With that footprint, the bank has amassed loans and leases worth $224.6 million, $173.6 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, BankTennessee exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and as protection for account holders when a bank is experiencing economic trouble. Therefore, when it comes to measuring an an institution's financial strength, capital is crucial. When it comes to safety and soundness, more capital is preferred.

BankTennessee received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, falling short of the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. BankTennessee's Tier 1 capital ratio was 11.24 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, BankTennessee held equity amounting to 9.87 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid loans.

A bank with lots of these kinds of assets may eventually be forced to use capital to absorb losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, pushing down earnings and increasing the chances of a future failure.

BankTennessee scored 36 out of a possible 40 points on Bankrate's test of asset quality, coming in below the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 1.08 percent of BankTennessee's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on BankTennessee's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, likely making the bank better prepared to withstand financial trouble. Banks that are losing money, however, are less able to do those things.

On Bankrate's earnings test, BankTennessee scored 22 out of a possible 30, better than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for BankTennessee was 13.17 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $3.9 million on total equity of $30.4 million. The bank reported an annualized return on average assets, or ROA, of 1.36 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.